Cunard’s prestigious vessel was sold to the Dubai firm Istithmar five years ago for £64 million. Its final voyage was to the Middle East in 2008, but since then it has remained largely unused, and is currently moored in the unglamorous surroundings of Port Rashid.

Initially the owners had hoped to transform the ship into a lavishly-appointed 1000-room hotel, but now they say it will feature just 300 rooms, and will retain many of its original features.

Rather than moving it to the more tourist-friendly Palm Jumeirah, the ship will also remain in Port Rashid, where it is hoped it will help transform the area into a tourist attraction. A new maritime museum will soon open nearby, and plans for an expanded cruise ship terminal have also been announced.

“Unfortunately we had many ambitious plans but they didn't work," said Sultan Ahmed bin Sulayem, chairman of Istithmar. “There were plans to renovate it in such a way that it becomes something totally different.... but we realised that a lot of people like the ship as it was.”

He added that public areas such as restaurants and entertainment halls would be largely left alone.

The project is expected to be completed by the end of 2013.

The QE2 was launched in 1969 by the Queen, making its maiden voyage from Southampton to New York. It was operated for nearly 30 years by Cunard, and was used to carry troops to the south Atlantic during the Falklands War.